CHAPTER 17Contributions to Return

Performance calculated at the total portfolio level summarizes a lot of data within a single return number. Dissecting the total portfolio return into components allows an analyst to uncover the sources of the return. In this chapter, we build a framework for decomposing total return into components, by computing portfolio weights and returns. The resulting decomposition is called contributions to return.

A portfolio consists of a collection of assets that may be grouped into segments. Usually, a natural grouping of the assets is available for a particular analysis. A large institutional fund, for example, may have divided its market value among several investment managers. Or a fund may be invested in several ...

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